This article is written by Riya Ranjan, from Lloyd Law College. This article deals with the minor economic offences that got decriminalised in 2020 during the pandemics. It also deals with the reason and measures behind decriminalising such offences.

Introduction

If we talk about the current economic system, the COVID-19 pandemic has hit the economy really hard. During the initial phase of lockdown, the Indian economy was expected to lose over 32,000 crores every day. According to the Ministry of Statistics, India’s growth in the 4th quarter of the 2020 fiscal year went down to 3.1%. Almost 53% of businesses in the country were projected to be significantly affected due to COVID. 

The supply chains have been put under stress with the lockdown guidelines and restrictions. The Government of India reached the conclusion to decriminalise some minor economic offences to promote investments. In the course of the pandemic, the Ministry of finance decriminalised 39 minor offences which include 19 different Acts. 

Objective behind decriminalisation of economic offences

Looking at the poor economic conditions during a pandemic, the government tried to uplift the economic conditions of its poverty-stricken people. The Ministry of finance proposed some measures in which they decriminalised some minor economic offences. The idea behind decriminalisation is to facilitate ease of doing business in India and reduce the fear of penalties for minor violations; various sections of different laws have been brought under the ambit of this notification. The government has decriminalised such offences with the objective of achieving ‘Sabka Saath, Sabka Vikas, and Sabka Vishwas.‘   

One of the major reasons behind decriminalising the economic offences was to have an impact on business sentiment and attract more foreign investments from both domestic and foreign investors. The objective is to clear the hindrances that foreign investors faced earlier with regard to this, and lead them further to invest in India. The risk of imprisonment for actions or omissions that aren’t necessarily fraudulent is a big hurdle in the pathway for attracting investments. To safeguard the less serious offences, it is also important to find a balance, so that malafide and serious offences are punished. 

Here, the government is planning to introduce a framework where ‘malafide intent is punished while other less serious offences are compounded.’ There is no need to have criminal liability attached to these sections for minor economic offences. The imposition of heavy penalties and fines will also act as a deterrent for offenders committing similar kind of offences in the future 

The offences that are decriminalised during a pandemic

On June 8, 2020 The Ministry of finance decriminalised 39 minor economic offences containing 19 different acts, including dishonor of cheques under Section 138 of the Negotiable Instruments Act, 1881. Section 138 of the Negotiable Instrument Act, 1881 was introduced as a criminal offence in 1989 by way of an amendment. It provides that when the cheque is dishonored for insufficiency of funds or for any of the prescribed reasons, the defaulter should be punished with imprisonment that may extend upto two years, or with a fine that may extend to twice the amount of the cheque or both. 

The apex court observed in the matter of Meters and Instruments Private Limited and Another vs. Kanchan Mehta, that the nature of offences under Section 138 are primarily related to a civil wrong and further, the dishonoring of cheques was criminalised in the year 1988. With the magnitude of economic transactions, today the decriminalisation of dishonoring the cheque of a small amount may also be considered, leaving it to be dealt with under civil jurisdiction. 

Decriminalised offences

Section 138 and 143(1) of the Negotiable Instruments Act, 1881 

Section 138 and 143(1) of the Negotiable Instruments Act, 1881, states that any person who dishonored the cheque either because of the account is insufficient to honour the cheque or it exceeds the amount to be paid to from that account by an agreement made with that bank, shall be punished with the imprisonment for a term which may extend for 2 years or with fine which may extend to twice the amount of the cheque. 

Section 58B of RBI Act, 1934

Section 58B of RBI Act, 1934 protects the acts done or any damages caused by any person in the good faith or intended to done in the pursuance of any order, regulation or direction made or given under this act.

Section 12 and Section 103 of the Insurance Act, 1938  

Section 12 of the Insurance Act 1938 provides the power to the auditor to audit the accounts annually and exercise the functions vested to him. The auditor can also discharge the duties and be subject to the liabilities and penalties imposed under Section 145, of Company Act, 2013. Whereas, Section 103 of the act imposes penalty on any person who for carry on  any insurance business in contravention of sections 3, 7 and 98, shall be punished with the imprisonment for a term which may extend for 3 years or fine or penalty not exceeding five lakh rupees for each such failure 

Section 29 of the SARFAESI Act, 2002

Section 29 of the SARFAESI Act, 2002 states the punishment of the offences done by any person to contravene the provision of this act or any rule made under this act shall be punished with imprisonment for a term which may extend to one year, or with fine, or with both.

Section 16(7) and 32(1) of PFRDA Act, 2013

• Section 16(7) of the PFRDA Act state any person fails without reasonable cause or refuses to produce any document, record or information or to answer any question which is put to him by the Investigating Authority in pursuance of that sub-section, shall be punished with imprisonment for a term which may extend to one year, or with fine, which may extend to twenty-five crore rupees, or with both. 
• Further, Section 32(1) of the Act states that any person who contravene or abet to contravene the provision of this act or any rule made under this act shall be punished with imprisonment for a term which may extend to 10 year, or with fine which may extend to twenty-five crore rupees, or with both.

Section 26(1) and 26(4) of Payment and Settlement Systems Act, 2007

• Section 26 of the Payment and Settlement System Act, 2007 states the penalties. Section 26(1) specifically states that if any person contravenes or fails to comply with the terms and condition for the issue of  authorisation under Section 4 and Section 7, then he shall be punished with imprisonment for a term which may extend to ten year or not less than one month, or with fine, which may extend to one crore rupees which further extends to one lakh rupees per day or with both. Whereas Section 26(4) states that if any person disclose any prohibited information under section 22, then he shall be punished with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees, or with both.

Section 56(1) of NABARD Act, 1981

• Section 56(1) of the NABARD Act, 1981 states that any person who is incharge or is responsible for the conduct of the business of the company at the time of the offence committed, shall be deemed to be the guilty of that offence and liable to be proceeded for the punishment. This section also provides that the person shall render from the punishment if he proves that the offence committed without his knowledge or the act was done to prevent the commission of such offence. 

Section 49 of the National Housing Bank Act, 1987

Section 49 of the National Housing Bank Act, 1987 states that whoever producing any document or information, under the provision of this Act, knowing it to be false or wilfully makes a statement which is false in any material particular, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which may extend to two thousand rupees in respect of each offence. 

Section 42(1) and 42(2) of the State Financial Corporations Act, 1951

• Section 42(1) of the State Financial Corporations Act, 1951 states that whoever wilfully makes any false statement or knowingly permits any false statement in any receipt, Bill or any document is given or is purported to be given to the Financial Corporation for any accommodation granted by it under this Act shall be punished with the imprisonment for a term which may extend to two years, or with fine which may extend to two thousand rupees, or with both. 
• Whereas, Section 42(2) states the use of the name of the Financial Corporation in any prospectus or advertisement without the consent in writing of the Financial Corporation, shall be punishable with imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

Section 23(1) of the Credit Information Companies (Regulation) Act, 2005

• Section 23(1) of the Credit Information Companies (Regulation) Act,  2005 provides punishment to any person who wilfully makes a statement which is false in any material particular, knowing it to be false, or wilfully omits to make a material statement, in any return or other document or in any information required or furnished by, or under, or for the purposes of, any provision of this Act with imprisonment for a term which may extend to one year and shall also be liable to fine.

Section 23 of the Factoring Regulation Act, 2011

• Section 23 of the Factoring Regulations Act, 2011 provides punishment to any person who contravenes or attempts to contravene or abets the contravention of the provisions or rules made under this Act with imprisonment for a term which may extend to one year, or with fine, or with both. 

Section 37, 38(2) and 40(2) of Actuaries Act, 2006

• Section 37, 38 and Section 40(2) of the Actuaries Act, 2006 talks about the penalties of the offence made under this provision. Section 37 states if anyone falsely represents himself a member the institute or uses the destination of Actuaries or practises the profession of an Actuary, shall be punished with imprisonment for a term which may extend to one year and shall also be liable to fine which further extends to two lakh rupees. 
• Section 38(2) states that, if any person use a name or a common seal which is identical with the name of the Institute or award any degree, diploma or certificate any qualification or competence in actuary ship similar to that of a member of the Institute, shall be punished with the imprisonment for a term which may extend to one years, or with fine which may extend to one lakh rupees, or with both.
• Section 40(2) states that any person who is not the member of the institute shall sign any document on behalf of an Actuary in practice or a firm of such Actuaries in his or its professional capacity, shall be punished with the imprisonment for a term which may extend to one years, or with fine which may extend to one lakh rupees, or with both.

Section 36AD(2), and 46 of Banking Regulation Act, 1949

• Section 36AD of the Banking Regulation Act, 1949 talks about the prohibition of certain activities in relation to banking companies, it states that no person shall obstruct any person from lawfully entering or leaving any place of business of a banking company or holds any demonstration which is violent or is calculated to prevent, the transaction of normal business by the banking company. Clause 2 of this section provides punishment for such activities with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both. 
• Whereas, Section 46 of the provides the punishment to any person who wilfully makes any false material statement, or false fails to produce any book, account or other document or to furnish any statement or information to which his duty is to produce or furnish, or to answer any question relating to the business of a banking company which is asked during inspection.

Section 30 of the General Insurance Business (Nationalisation) Act, 1972

• Section 30 of the General Insurance Business (Nationalisation) Act, 1972 states the punishment to anyone who wilfully withholds or fails to deliver to an Indian insurance company any property or any books, documents or another document which may be in his possession or unlawfully retains possession of any property of an existing insurer which has been transferred to and vested in an Indian insurance company with imprisonment for a term which may extend to one year, or with fine which may extend to one thousand rupees, or with both.

Section 40 of the Life Insurance Corporation  Act, 1956

• Section 40 of the Life Insurance Corporation Act, 1956 states the punishment to anyone who wilfully withholds or fails to deliver to the Corporation any property or any books, documents or other papers which may be in his possession or unlawfully retains possession of any property of an insurer which has been transferred to and vested in the Corporation, with imprisonment which may extend to one year, or with fine which may extend to one thousand rupees, or with both.

Section 21(1), 21(2), 21(3), 22, 23, and 24 of Banning of Unregulated Deposit Schemes Act, 2019

• Section 21 of the Banning of Unregulated Deposit Schemes Act, 2019 provides the punishment for the contravention of Section 3 of the Act. Clause 1 provides punishment for any deposit taker who solicits deposits in contravention of Section 3, Clause 2 for any deposit taker who accepts deposits in contravention of Section 3, and any deposit taker who accepts deposits or fraudulently defaults in repayment of such deposits or in rendering any specified service  in contravention of Section 3.
• Section 22 provides punishment to any deposit taker who contravenes the provisions of Section 4 with imprisonment for a term which may extend to seven years, or with fine which shall not be less than five lakh rupees. 
• Section 23 provides punishment to anyone who contravenes the provisions of section 5, with imprisonment for a term which may extend to five years and with fine which may extend to ten lakh rupees.  
• Section 24 provides punishment to anyone who continuously contravene the provision of this Act, with imprisonment for a term which may extend to ten years and with fine which shall not be less than ten lakh rupees but which may extend to fifty crore rupees.

Section 76(1), 76(3), and 77 of Chit funds Act, 1982

• Clause 1 of Section 76 of the Chit Funds Act, 1982 provides punishment with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupees or with both for the contravention of certain section provided under this Act. Whereas, Clause 3 provides punishment to anyone wilfully making a statement in any document required to be filed under this Act, with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupees or with both.
• Section 77 says any person shall be convicted again who is already convicted of an offence under sub-section (1) or sub-section (3) of Section 76 and shall be punished again and for every subsequent offence with imprisonment for a term which may extend to two years and shall also be liable to fine.

Section 47(1) of DICGC Act, 1961

• Section 47(1) of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 provides punishment to anyone who willfully makes a statement which is false in any material particular or provide any  any return, balance-sheet, or other document or in any information required, knowing it to be false, with imprisonment for a term which may extend to three years and shall also be liable to fine.

Section 4, and 5 of Prize Chits and Money Circulation Schemes (Banning) Act, 1978

• Section 4 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978  provides punishment to anyone who promote or conduct any prize chit or money circulation scheme, or enroll as a member to any such scheme, or participate or receive any money in pursuance of such chit or scheme, with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both. 
• Whereas, Section 5 provides punishment for other offences in connection with prize chits or money circulation schemes with imprisonment for a term which may extend to two years, or with fine which may extend to three thousand rupees, or with both. It also provides punishment for absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court.

Factors to consider before decriminalisation

The present biggest agenda of the government is “Ease of doing business.” A number of measures were taken by the government to boost the confidence of investors in the Indian economic market. In India, new projects were initiated such as Make in India, Foreign investment, decriminalisation of minor offences, non-compliance under the Company’s Act, etc.

After introducing “Ease of doing business” for the investor, it also became easy to handle the legal process or the time consumed by the courts in resolving disputes. Before undertaking any business activity or making any investment for the investors, the fear of attracting criminal implication for small, minor, or petty matters also act as a deterrence. The investors’ decriminalisation of such matters act as an encouragement, such as investors undertaking any activity and making an investment without fear of any criminal consequences.

On the other hand, decriminalisation may come as a bonafide initiative as well, so the government must arrange and maintain their mens rea (malafide) that plays a very important role in the imposition of criminal liability. Therefore, it has become very difficult to analyze the factor before the decriminalisation of such offences.    

Need for the decriminalisation of economic offences

It is essential that one should review the provisions that are solely procedural in nature and do not impact the national security or public interest to much of an extent. Due to the pendency of a huge magnitude or overburdening of such cases on minor offences, the criminality of major offences may be losing its sheen in the crowd. A petty offence could be settled by way of a fine and not result in imprisonment. A framework must be required so that a penalty given to the offender is sufficient to act as a disincentive.

This step was taken after the recommendation of various economists on improving procedures to achieve several milestones. The sustained enactment of energetic restructurings when coupled with durable industry participation, will permit India to offer one of the best import and export across the border environments in the world. These are some objectives set by the government behind the idea of decriminalising minor economic offences: 

For improving business sentiment

Criminalising procedural lapse and minor offences increase the burden on businesses and that merely focuses on economic growth, national security, or public interest at large. While doing business and attracting investment which is malafide are seen as obstacles for the relief of an already overburdened court system this is intended. There are some key considerations behind this purpose:

1. The habitual nature of non-compliance.
2. For the inspiration among both old and fresh investors.
3. Decreasing the overburdening on business.
4. For the improvement of social, economic growth, and public interest.
5. This move is time-consuming. 

Unclogging court processes

There are a number of cases on minor economic offences, pending in several courts in India, cast a shadow on the credibility of Indian trade, commerce, and business. According to the National Data Grid, the total number of cases pending in India are 3,29,08,887 out of which pending criminal cases are 2,37,67,564 (around 72%) and pending civil cases are 91,41,323 (around 27%) in June 2020.  

Due to the backlogging of these cases, other important or more serious cases were left behind. The government has made claims time and again to assure everyone of finding ways to make civil courts more efficient so that more cases can be disposed of in a shorter span of time. This proposal will also reduce the burden on the criminal justice delivery system and bring the law in line with the policy, legislative and legal initiatives. To decrease the backlogging of these small offences or less serious cases it is necessary to decriminalise some small offences.     

To increase foreign investment in our country

The idea behind decriminalising the minor offences is that it may attract foreign investors to invest in India. In comparison with the previous year’s statistics, the import and export market has also seen heavy inflation, India’s exports in April 2020 fell by 60.28% while imports in April 2020 fell by 58.56%. However, the decriminalisation will also help in raising the foreign import and export in India and subsequently attract foreign investors to invest in India. 

For boosting the economy of the country

As discussed earlier, the economic condition of the country is continuously straying during the pandemic. It is very difficult for the government to deal with the economy and pandemic at the same time. The government had taken many measures and policies before but that is not efficient for the investors and economic system. This measure will improve transparency, inspire collaboration between investors, and progress traders’ compliance which will further help in boosting the economy. 

Conclusion

The government’s idea of raising the economy by decriminalising minor offences has attracted the business entity and investors but somehow it has adversely affected the creditors. Decriminalisation of such offences will create a sense of unease amongst creditors as it will lead to delay in payment of debt and they may not feel hesitant to give credit due to lack of strict punishment on matters of cheque bounce. 

The government also has to look after the interest of the creditors who will suffer as they will have to wait longer to recover their dues. The government should also ensure the interests of various stakeholders are taken into consideration while focusing simultaneously on an effective redressal mechanism for such offences and make the provisions to maintain the sanctity of contracts. Criminal jurisprudence requires the intent to be proved beyond a reasonable doubt by removing the criminal liability from these sections. After that there would be more cases of giving false cheques, more cheques being dishonored, and asking for deposits in unauthorized schemes. Such things then result in the creditors and people losing faith in investing their precious money in our economy.

In India, the punishment for economic offences is not very harsh. Before decriminalising the minor economic offences, the governments should have checked the other methods. The period of imprisonment and the amount of fine is very less according to the offences. Therefore, these are not taken seriously and the fear of punishment for such offences is negligible. It became difficult to evaluate the nature of non-compliance because the malafide intention plays an important role in the imposition of criminal liability.

Instead of decriminalising such offences, the government may enforce heavy penalties on such offences and the people ignoring penalties should be punished harshly. The investors should not suffer because of mistakes committed due to unintentional negligence or without any fraudulent intention. However, a balanced approach is required to be adopted by the government, so as to have a deterrent effect against the wrongdoer. 

References

• http://www.lawstreetindia.com/experts/column?sid=416
• https://www.mondaq.com/india/crime/977308/decriminalisation-of-minor-economic-Offenses-a-step-towards-sabka-saath-sabka-vikas-and-sabka-vishwas39 

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